Samsung looks to get the jump on Apple in the latest round of lawsuits

An
unnamed Samsung Electronics Comp., Ltd.'s (SEO 005930) senior executive was
quoted in The Korea Times as stating that "his" company planned to go
on the offensive in its legal battle against Apple, Inc. (AAPL), suing in multiple regions to try to ban sales
of Apple's upcoming iPhone 5.

I. Samsung Goes on the Offensive

The report quotes the male senior executive as saying, "Just after the arrival
of the iPhone 5 here, Samsung plans to take Apple to court here [in S. Korea]
for its violation of Samsung’s wireless technology related patents. For as long
as Apple does not drop mobile telecommunications functions, it would be
impossible for it to sell its i-branded products without using our patents. We
will stick to a strong stance against Apple during the lingering legal
fights."

It was Apple who launched the patent war, by suing to ban Samsung sales in the
U.S., one of the world's most lucrative phone markets. But it was Samsung
who escalated the patent dispute, suing Apple in Germany, Japan, and South
Korea.

The report in The Korea Times largely ignores this
distinction, inferring that Samsung is changing gears from a defensive to an
offensive role. It quotes the executive as saying; "We are taking
different tactics since we are quite confident."

More correctly, Samsung indeed may be altering its strategy, but it's likely
instead trying to push for faster rulings. For example its case in Germany
was filed before Apple's, but still is yet to be resolved, while the Apple one wrapped up last week. With the iPhone 5,
Samsung likely wants to sue Apple before it can be hit with new lawsuits
regarding the Galaxy S II.

II. From Friends to Enemies

The Android phone maker enjoys a complicated relationship with Apple,
Inc. (AAPL), much like Android OS-creator Google Inc.'s (GOOG) relationship with Apple. In addition to
its discrete devices units, Samsung is also one of the largest component
producers, making memory, CPUs, and screens for small portable devices.

Apple has long been one of its largest clients. Samsung is Apple's primary
supplier of NAND flash memory, the storage chips found inside the iPad and
iPhone products. Samsung also has manufactured Apple's CPUs. Early
iPhone contained CPUs designed directly by Samsung. In recent models,
Samsung's role as chip designer has blurred as Apple has begun branding its
chips and contributing substantially to the final design -- though Samsung is
still thought to be playing a key role in design.

However, the pair's relationship has been stressed to the breaking point by the fact that
Samsung is currently the world's top maker of Android smartphones and tablets,
vying with Apple for the top spot in global sales. As Android smartphones
have recently begun to outsell the iPhone 5-to-2and Android tablets creep towards the once seemingly insurmountable iPad
sales lead, Apple has sued [1][2][3][4][5][6][7][8] the world's top
Android manufacturers claiming that they have stolen its patented designs and
technology.

Samsung CEO Choi Gee-Sung comments, "Apple is Samsung’s biggest customer.
Hewlett-Packard (HP), Nokia and Sony were Samsung’s previous big clients,
however, Apple is now a primary one. From our perspective, we are not entirely
happy (about the litigations)."

III. What Does Apple Claim?

Apple has been particularly pointed in its words for Samsung. In its
first lawsuit against its estranged supplier, it writes, "Rather than
innovate and develop its own technology and a unique Samsung style for its
smart phone products and computer tablets, Samsung chose to copy Apple's
technology, user interface and innovative style in these infringing
products."

Much of the technology intellectual property involved in the suit deals with
the core Android OS -- for example the way touch works in certain phone
applications. However, Apple, thus far, has declined to directly sue
Google instead targeting the top manufacturers who use Android
OS.

Additionally Apple claims that Samsung's smartphones copy its patented design
on the iPad and iPhone.

The "fat iPad" design patent (D504,889 in the U.S.) was
filed in 2004 and depicts a device with no face buttons (unlike the iPad which
has one face button) and only a power button on the edges (no mute button or
volume rockers like on the iPad). The device was also much thicker than
the iPad, based on the drawings contained in the filing. As a result the
design looks relatively little like the iPad or
the Galaxy Tab (Samsung's tablet), beyond the fact that both are
"minimalist" rectangular tablets.

By contrast the iPhone design patents (D618,677 and D593,087 in the U.S.), which
were filed shortly after the release of the iPhone 4 and iPhone (original),
respectively, look much more like the respective iPhone models at the time.

Substantial visual differences can be found between the patent and Samsung's
best-selling Galaxy S/S II smart phones, the primary target of the lawsuit on
the smartphone front. The Galaxy phones have at least three physical face
buttons and feature a curvier bottom than the iPhone. On the other hand
if you ignore the side face buttons, the phones do look somewhat alike, in that
both have a small speaker slit above the screen and a home button beneath it.

Probably the most compelling evidence on Apple's behalf is that the Galaxy S
featured a curvier look à la the iPhone (original), where as the Galaxy S
II morphed into a blockier look à la the iPhone 4.

Samsung claims that it didn't copy Apple's design and that it's simply giving
the market what they want in terms of looks. And sales figures seem to
back that statement to some extent -- the Galaxy S and Galaxy Tab products sold
millions of units worldwide.

The South Korean company's infringement claims against Apple stem largely from
its deep portfolio of wireless communications patents. Much like Apple,
Samsung is essentially inferring that Apple must broadly alter its product from
what the market seemingly demands to bring it out of infringement.

Much as Apple says Samsung cannot make a minimalist tablet, Samsung says Apple
cannot make a tablet with wireless communications onboard.

Apple is very upset about this claim as many of the
patents involved are filed under the "fair, reasonable and
non-discriminatory" (F/RAND) principle. F/RAND applies to patents
developed as part of industry standards. It states that companies must
pay you fair licensing fees for the patent, but you must express willingness to
license the IP.

By contrast, Samsung is looking to ignore the F/RAND provisions and seek a
sales ban -- an identical tactic to Apple's. The move raises a compelling
question of limits F/RAND. Namely, the question goes something like -- is
a company that's broadly looking to kill a F/RAND patent holder's products
"unreasonable" and hence subject to licensing refusal?

Again the answer here seems largely subjective.

V. Fallout of the Patent War

If Apple is banned in the Samsung-friendly Korean court it will lose a nice
chunk of sales. SK Telecom Comp., Ltd. (SEO:017670) and KT Corp. (SEO:030200), South Korea's top two wireless carriers, have
collectively sold 3.1 million iPhones -- mostly iPhone 4s.

Thus the loss to Apple would be even greater than the loss Samsung suffered in
Germany -- which is expected to see 2.4 million tablet sales this year (of
which Samsung was expected to have significant minority stake, before the ban).

So far Samsung has yet to win a case, although the majority of the 23 lawsuits
filed internationally between the two companies have not made it to a ruling
yet. However, many believe that Asian courts, such as the South Korean
court, will display favoritism towards Samsung, a top local firm.

Samsung is appealing the German verdict and hopes soon to
strike blows of its own. Comments the unnamed executive, "If Samsung
wins in Germany that will give us a big breakthrough and so will other
envisioned efforts against such products as the iPhone 5."

Regardless of who "wins" the patent war, it's likely that the
consumers will lose by a reduction of choice in the market. Some may lose
access to the Android tablets or smart phones, while others may miss being able
to buy 3G-equipped iPads or iPhones.

Despite this, like some sort of Cold War-gone-awry scenario, Samsung, the
largest Android smart phone maker, and Apple, its bitter rival, continue to
march along the path to mutually assured destruction.

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This article is over a month old, voting and posting comments is disabled

It would hurt Apple quite a bit if Samsung were to do that. Sure they would be able to recover with another supplier but that supplier would have to ramp up production. Who knows how long that would take. In the meantime, iPhone revenues in that market (or markets) would be lost.

The only reason Samsung is still manufacturing components for Apple is due to contractual obligations.

I'm sure both companies would like to cut ties at this point to get back at one another, but without each company boards' approval, those supply contracts are in effect until expiration, whenever that is...

Largan Precision and TPK are already the announced suppliers for the camera and the screen in the iPhone 5. Dynapack and Simplo will share the battery pack manufacturing, and the NAND is rumored to be from Micron, although another rumor indicates 'a TSMC supplier' which would rule out both Micron and Samsung. So far, there isn't a hint of Samsung technology in the device, so there is obviously a movement not to renew these contracts already.

There are bound to be existing contracts in place, contracts which Samsung wouldn't want to violate and which aren't going to get renewed for the upcoming Apple products. Hence the most logical course of action is to fire back with everything they've got in the patent department without actually exposing themselves to further lawsuits for breach of contract.

My question: is there contract language that says you will not sue me for stupid crap, and if so can they legally get out of the contract? I'm pretty sure it sucks being forced to work for the person sueing you.

I don't think Samsung has anticipated the course Apple has taken even in their wildest dreams, hence this wasn't part of their supply contract. Had it been included, Samsung surely would have terminated the contract (and stop shipments) some time ago and let Apple deal with the consequences.

It seems to me that Samsung is seeking a judge to rule down the middle and say "so Apple you've been using wireless technology that is patented by Samsung while you Samsung have been using designs eerily similar but not identicle to Apple's product designs. Both are guilty and as such the ruling is that Samsung can continue production on their devices and sell them as long as the devices Apple sells use the patented technology owned by Samsung."

So basically as long as Apple uses Samsung tech Samsung is in the clear. This is what I believe they are hoping for,

Re: Moving to other suppliers - it is already in progress, see ElReg (Taiwan, if the reports are accurate).

Issue is that Apple is using custom chips, and you cannot move them very fast elsewhere. Apple is doing the high level design in Verilog/VHDL/whatever, and the result is compiled with the libraries provided by the ASIC vendor (Samsung in the case of the current CPUs used in iWhatever). After you have the first compiled output with no errors, the real fun starts: you have to look at the propagation delays and optimize the critical path through the device. This can take a LOT of time and iterations, on super-computer level monsters (many weeks, possible month). Then, you need to generate the test vectors used in production, and validate them to get 98+% coverage. All this work needs to be done BEFORE any silicon masks can be generated. After you get first silicon, you want to process three wafer lots (not in sequence) and look at parametrics (power consumption, leakages, input impedances, etc.) before you turn on high volume production, even for a digital chip like a CPU with very few analog blocks inside (PLL for the clock is one analog block present in most current CPUs).

Change to a new ASIC foundry? No problem, you start from the library compile step above - and you are anywhere between 4 and 9 month away from high volume production, if you do not hit any snags (like violating some of the new foundry's design rules in your VHDL code).

Issue is further complicated by the use of stacked silicon in the Apple CPUs made by Samsung - that packaging technology is not cheap nor widely available in the industry, and most likely has Samsung process patents all over it.

Good news for Samsung is that overall revenue from Apple is less then 2% of their total sales, so while it will be a negative to loose Apple chip sales, it is far from being a huge issue.

Samsung is the worlds only manufacturer of the A5 chip. I'm sorry but I don't care how much money Apple has, it can't magically make hardware on par with this appear. Without the A5 chip, the iPhone 5 is a pile of crap that already gets beat by today's phones like the awesome Galaxy S II. Claiming losing this hardware supplier will be "business as usual" shows yet again what a fanboi fucktard you are. It would take TSMC months to ramp up production on a new chip design for i devices, pushing the iPhone 5 even further past the technology curve than it already is.

That might be, but in this case it would also count to refuse provide components for devices that breaching your own patents.And if court agree with claim that Apple indeed unlawfully (without owning license) using Samsung patents in its devices for which Samsung is providing components it might give them easy way to stop providing them component until Apple fix it.